Business environment: Imperial leather

Subject: Science
Type: Analytical Essay
Pages: 12
Word count: 2819
Topics: Ecology, Environmental Issues, Macroeconomics, Microeconomics
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Introduction

Companies operate in environments that are both dynamic and complex. In an attempt to deal with these environments, companies seek different ways to compete favourably in order to make profits and ensure that their customers are satisfied. Essentially, the factors that influence business operations are categorized into two broad branches which are macro and micro environments. Basically, macro environments refer to the external factors that affect business operations. Mostly, the company affected has no control over the macro environmental factors. They include political and legal factors, the ecological environment, technological development and economic factors such as inflation and monetary policies. While the company may lack control over these factors, they affect and influence its activities quite significantly. On the other hand, microenvironment encompasses factors that company can control. In other words, these are internal factors and they include competitive strategies, marketing techniques, customers, and suppliers. Notably, controlling, in this case, refers to having a significant influence on the decision making over these factors. This paper will discuss the macro and micro-environmental factors affecting imperial leather UK besides presenting a SWOT analysis to give a clear picture of the company’s positioning. 

Macroenvironment scan

Ecological environment- with extreme climatic conditions being experienced due to global warming, calls for environmentally friendly production processes have been intensified (Kozlinskis and Guseva, 2006). Notably, these calls are not only being made by the governments but by the general public and non-governmental institutions. For this reason, companies are continually getting more pressure to indulge in corporate social responsibility particularly in regards to environmental conservation (Aguilera et.al, 2006). Bearing this in mind, imperial leather products are manufactured using raw materials and products that are biodegradable and that are not hazardous. Moreover, imperial leather soaps have no health effects on the users even in the long-term. Moreover, none of the components used in the manufacturing of imperial leather products have hazardous concentrations that are above the threshold indicated in Annex II of Reach Regulation.

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Economic factors– economic factors have an immense influence on the performance of a company. These factors are largely influenced by monetary regulation set by the central banks, inflation rates, and gross domestic product among others (Ayyagari et.al, 2008). Essentially, when these factors are favourable, that tends to benefit the companies and the opposite is true. As of September of 2017 for instance, the inflation rate ion UK stood at 2.9% which is the highest it has been in five years (Sajuyigbe, and Ayanleke, 2013). The repercussion of this would be increased in the cost of raw materials and thus the cost of production. In this case, imperial leather could explore various options to hedge against the surge in the inflation rate. One of the options could be increasing the prices of the products. This could, however, see the consumers seek alternative products. On the other hand, given the economies of scale, the company can opt to exercise its bargaining power over the suppliers and have the raw materials delivered at fair prices. In case of low GDP rate, imperial leather is likely to incur loses owing to reduced consumer power.

Political and legal factors– politics is a major element of the macro environment more so in the sense that it plays a major role in creating an enabling environment for business operations (Goodin and Dryzek, 2006). To a large extent, politics is to blame for the rift that exists between developed and developing countries. Notably, developing countries are characterized by rampant political upheavals which result in economic derailment. On the other, sound politics have seen developed countries achieve milestones in the economic sector. The UK is one of the developed countries and companies located therein such as imperial leather continue to enjoy the benefits of favourable political climate. Notably, political and legal factors go hand in hand. One of the legal requirements that imperial leather has to adhere to regards waste disposal. The European Union waste Framework Directive requires that measure is taken to ensure waste is disposed of in such a way that does not endanger the environment or becomes a threat to human health (Gov.uk, 2017). 

Technological factors– when the technology first made headlines, it drew much scepticism and doubt in regards to what its role would be. In modern markets, however, technology has become an element of paramount importance in business operations (Melville et.al, 2004). Notably, technology helps extremely much in enabling a company to be competitive in the market. Companies that opt not to harness technology and settle for brick and mortar operations often get faced out of the market. Controlling what technology comes next is out of the control of most companies hence their only option is to decide on whether to adopt the new technology or not. So far, imperial leather has done a commendable job in harnessing technology in business functions including manufacturing and marketing. In marketing, for instance, imperial leather uses social media platforms to advertise its products in the UK and in other markets it is established in (Hoffman and Fodor, 2010).

Microenvironment scan

Ordinarily, the microenvironment does not affect the companies, in the same way, owing to the difference in size, strategies used, capacity and the capability of the company. For instance, suppliers may be inclined to give more concessions to large companies but they might do the same for smaller companies (Lambert and Schwieterman, 2012). Similarly, a company would be less concerned with a small company competing against it but very concerned with a large company competing against it. 

Customers– according to Drucker, (2014), the definition of business purpose is to create a customer. This definition is valid for the reason that companies seek to make a profit which is made possible by serving and satisfying customer demand. Every aspect and function of a company revolves around the customer essentially because, without the customer, the company would easily shut down. Imperial Leather has a wide customer base in the UK and in other international markets. Over the years it has been in existence, it has managed to increase its customer base by weathering competition, harsh economic constitutes and most importantly satisfying the customer (Erez and Gati, 2004). Earlier on, we mentioned that microenvironment encompasses some of the factors that the company can influence. In this regard, the imperial leather influences customer loyalty by providing quality products that meet the customer needs. It is important to mention that customers constitute the most important element of the microenvironment. In order to keep up changing preferences among the customers and their attitude toward the products, imperial leather conducts surveys to gather this information. Consequently, the company uses this information to improve the quality of its existing products or introduce more products under the brand (Jacobs and Jones, 2011). 

Suppliers– Michael porter impressed that the relationship between the suppliers and the companies epitomizes the power equation that subsists between them. This equation is determined by the conditions within the industry and the extent to which they depend on each other. Suppliers are essential to the company considering that without them the company may not manage to produce the end products it does. In other words, suppliers provide the elements that the company needs to create a product for the end user. For a brand enjoying as much economies of scale as imperial leather, bargaining with the suppliers would be much simpler. However, this possibility is not always plausible considering that economic conditions could influence suppliers to stand their ground. In 2011 for instance, Imperial leather opted to review their pre-tax profit forecast downwards. This move was influenced by the high cost of raw materials and the difficulties experienced at the time in the consumer environment. Considering the significance of the suppliers to the company, a company ought to undertake a process of determining the best supplier to settle for. The company ought to develop specifications in searching for potential suppliers. Thus, they will be able to settle for suppliers who have the best mix of quality, warranties, reliability in delivery and ultimately offer low costs (Jackson and Senker, 2011). Notably, the development of supplier’s environment has significant effects on the performance of the company. Fortunately, recent trends indicate that companies can increase the quality of their products and lower their supply cost.

Marketing– marketing is a critical element in the microenvironment for any company. While a company could have a revolutionary product, the value of the product will only be as good as the reach of marketing. Essentially, unless the public learns about the product, all potential customers will only be potential and nothing more. There are two main ways in which marketing can be conducted. One, the company can opt to use intermediaries for marketing or it can opt to market its products itself. Moreover, if plausible, the company can opt to exploit the two marketing options together in an attempt to reach a bigger audience. Notably, even though a company may seek to engage intermediaries to assist in marketing the product, the company must dictate the best approach to be used in order to reach the customers effectively and hence boost the company’s profits. Imperial leather opts to undertake its own advertising as opposed to contracting intermediaries.

 In order to reach target audience effectively, the company involves key figures such as celebrities to advance the marketing efforts. In 1988 for instance, imperial leather engaged Estelle Lefebure in the printing of the imperial leather advertisements. In 2013, the adverts for imperial leather form burst featured a genie theme and a tagline reading ‘release the lather, feel the magic’. The benefit of running own advertisement is that the company has better knowledge of the product thus it knows better the kind of marketing the product needs to reach the consumers effectively. Imperial leather also undertakes marketing for its products in the UK through social media marketing, television adverts and on billboards (Berthon, et.al, 2012). Notably, the success of a good product can be derailed by poor marketing. Thus a company must ensure that it adopts strategic marketing techniques to ensure that the consumers are well informed of the product.

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SWOT analysis

Strengths  Weaknesses 
  • The brand has strong presence globally including in Asia, Europe, and Africa. This has allowed the brand to enjoy a large customer base thus boosting its competitiveness. 
  • Limited reach. While imperial leather has a conspicuous presence in the UK, it has not sought to engage effectively in emerging markets. To some extent, this has limited its competitiveness.
  • The company is a constituent of the FTSE 250 index in the UK (Morningstar.co.uk, 2017). This means that it is one of the largest companies between 101st to the 350th company. The fact that it’s a big company and reputable improve its brand image hence drawing attention to the customers.
  • High competition. The company faces intense competition from other companies such as Bradford personal care, Unilever and KAO Corporation. Thigh competition means that the company can only enjoy very minimal margins. 
  • Rich brand heritage. The imperial leather brand has been around since the 1700s (Imperialleather.co.uk, 2010). In the course of all that time, it has maintained its heritage through its unique scent and quality of the products. 
  • Product diversity. The imperial leather brand includes imperial leather soaps, shampoos, detergents, healthcare products and gels among others (Alibaba.com, 2017). 
  • Imperial leather products are of high quality and they come at affordable prices. This has contributed to the large customer base that imperial leather enjoys in the UK and in other countries.
Opportunities  Threats 
  • Expanding to emerging markets. Notably, one of the determinants of how competitive a company is in modern markets is determined by its customer base or margins (Rose-Ackerman and Tobin, 2005). Considering that imperial leather offers fair prices for the products, expanding to new markets will boost its competitiveness.
  • The boom in the e-commerce sector. Notably, online retailers offer a wide range of products including soaps and detergents. Seeking to have their products sold by online retailers could hurt imperial leather’s bottom line. However, the company seeks to establish online stores for its products and come up with distribution plans.
  • Strategic Partnerships. Strategic partnerships in distribution, marketing, and the entire supply chain, in general, will boost imperial leather performance in the UK. 
  • Political upheavals in developing countries. While imperial leather may be interested in entering into emerging markets in developing countries, its efforts are derailed by political instability in these countries.
  • Global brand building. Without the growing need for international business operations, imperial leather should seek to undertake global brand building. This will help create familiarity with the products. 
  • Currency depreciation in countries of operation. Currency depreciation is a macro-environmental element hence the company has no control over it. If for instance, the value of pound depreciates, the profitability of imperial leather will be affected by virtue of a decrease in the value of the currency. 

 

Strategic recommendation

Modern markets are quite competitive which means that they demand that companies employ sound strategic skills. The Imperial leather is performing well in the UK, but it can explore and focus on other factors to improve its performance. One of the strategies that the company can employ to improve its performance is focusing on its core competencies. The Imperial leather is known for producing quality products and offering them a low price. The company can, therefore, focus on optimizing this and outsourcing services that are not core functions of the company in order to improve its performance further. The rationale behind this is that while a company may be willing to mitigate its weakness and deal with threats it must not do so to the detriment of its strengths. Another strategy tht6a imperial leather can employ is attracting and retaining necessary talent. Markets have never been as dynamic as they are in the modern day. Customer preferences change so frequently and technological developments keep disrupting business activity. Basically, the best way to deal is to employ persons with relevant skills and can relate to some of these aspects. For instance, the company can employ young skills in product development. This will help develop products that perfectly fit a particular market. Additionally, engaging persons with sound technological skills would help the company manoeuvre the technological maze more effectively.

Another strategy that imperial leather can employ is becoming, even more, customer-centric. Essentially, the customer is king. The main reason that customers have an upper hand over the companies is because they have a wide range of options that they can explore. In the UK, there are so many detergents and soaps that the consumer can choose. To ensure that imperial leather retains its position in the country, therefore, the company can opt to increase customer support to emphasize on customer loyalty, customize production runs, review and improve branding strategies and exploiting social media further for marketing. Another factor that imperial leather should consider is venturing into emerging markets. So far, the company has ventured into several other markets besides the UK, but it has barely exhausted the emerging markets. Notably, venture into emerging markets will enable the company to widen its customer base, which will consequently improve its profitability and competitiveness as well.

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